The emergence of a fully networked economy now seems inevitable because of three recent trends: 1) software power is increasing and becoming less expensive largely due to the use of object oriented programming; 2) hardware power is increasing and becoming less expensive; and 3) communication and network power is increasing and becoming less expensive as a result of the Internet and related technologies.
The emergence of the global computer network or Internet has dramatically altered commerce. Entirely new paradigms for commerce have evolved or emerged from traditional non-electronic commerce business models. Indeed, electronic commerce, in particular, commerce through the Internet, is widely credited with introducing tremendous efficiencies into commercial transactions. The Internet has also dramatically altered the vendor/customer relationship. Prior to the advent of the Internet, customers faced geographic and informational obstacles in extracting the best prices and service. Research was time-consuming, and everyone from producer to retailer closely guarded information. Now, customers are in charge. A wealth of information on just about any product or service is available and geography is no longer an obstacle.
In addition, new dynamic pricing methods, from auction to buyer cooperatives and even barter sites are gaining much wider usage in the physical world. The ever-increasing number of websites where auctions are conducted has bid down prices to the bare minimum. An example is the so-called reverse auction process that favors buyers. Priceline.com. Inc., for example, lets buyers trade away convenience—exact departure times for flights—in return for lower prices than airlines would offer at retail. Companies such Accompany, Inc. and Mercata, Inc. aggregate groups of buyers so that the more people that agree to buy a product, the lower the price goes.
Given the efficiencies of electronic commerce, some have suggested that the Internet would eliminate the need for middlemen. Others have argued that, given the vast size and scope of the Internet, buyers still need middlemen to sort through the vast new choices of suppliers. Moreover, it is increasingly apparent that vendors or suppliers need to be where masses of buyers gather, which usually isn't an individual company's sites. As a consequence, there has emerged a form of middlemen on the Internet referred to as infomediaries, vertical portals or e-markets that serve to connect buyers and sellers everywhere; Because there is none of the friction of phones, faxes or in-person meetings, these Internet middlemen can gather vast numbers of buyers and sellers.
Despite the proliferation of business models and infomediaries throughout the Internet, however, almost all business models focus on price and, to a lesser extent, convenience. The race to optimization in these areas will inevitably result in numerous sources for goods at the lowest possible price with maximum convenience. What is lacking, however, is in ability to demonstrate a competitive advantage among these low-price high-convenience providers.
Thus, there remains a need for providing additional consumer value that is not driven entirely by pricing convenience. Indeed, the next great challenge of the new economy is transforming the lessons learned in the old economy into solutions for the new economy to expedite full development of e-commerce. It is often said that the new economy changes all the old rules for doing business. Indeed much has changed and much will change in the future. In the midst of this change, however, we often overlook the one component that changes only incrementally, not radically, we overlook the end customer: human beings. Long after the novelty of the network economy wears off, humans will be essentially the same as they are today—moved and motivated by the same desires, but armed with greater information and more choices. In this setting, customer service and satisfaction will be the keys to attracting, maintaining and growing customer relationships. Geographic proximity becomes irrelevant and price differentials evaporate customer service and brand awareness and perception will be the principle determinants of business success.
Thus, there is a need for a system and method that provides customer service and satisfaction in a network economy.
In the absence of face-to-face contact, and geographic proximity, the classic approaches to customer service and satisfaction are not directly applicable. Yet the customer wants essentially the same things: advice, information and efficient service and perhaps, above all, a sense of belonging—identification of certain groups, which can include merchants.
It is widely believed that an advantage of electronic commerce is that it eliminates the middleman and allows customers to deal directly with merchants. Proponents of this view fail to recognize that only a limited segment of the population is currently engaged in electronic commerce. As the network economy expands to encompass a wider swath of the economy, the dynamic will change. Also, electronic commerce is not yet mature—the absence of so-called “middlemen” in an immature economic structure should not be surprising.
Contrary to popular belief, the present inventor believes that “middlemen” can provide a valuable service in the network economy, particularly as this economy expands to encompass consumers that are not technically savvy.
To understand the role that “middlemen” can play in the network economy, it is useful to consider the value created or delivered by middlemen in today's industrial economy. Broadly stated, these advantages do not relate to bricks and mortar, but rather to intellectual capital and people skills—intangible characteristics. This is what separates premier retailers from pedestrian retailers. It is precisely this value added that will survive the “frictionless economy.”
Considering then the characteristics of a premier retailer (or wholesaler), one must begin with a commitment to customer service. Commitment to customer service can manifest itself in various ways and is often difficult to pinpoint yet, any person that has experienced both environments knows that shopping at Nordstrom's is different from shopping at K-Mart. Premier retailers also provide value through knowledge of products sold and fashion trends. Premier retailers also simplify the purchased transaction and maximize customer comfort and convenience. These values are quite distinct from the brick and mortar of the retail store. Indeed, the success of premier chain store retailers i.e., Nordstrom, demonstrates that the value created by commitment to customer service is largely independent of the physical facility. Instead, success depends on intangible characteristics.
Premier retailers also display the merchandise in interactive ways—products are “merchandised” and attractively displayed. This may be the most important differentiator among retailers, the virtual analog is providing the customer a very attractive, easy to use site.
If success depends on intangible characteristics, then those intangible characteristics should have some analog or replication in the virtual economy customer. An object of the present invention is to provide systems and methods that replicate the positive aspects of traditional retail and wholesale commerce in a virtual environment by providing a suite of tools that can be used alone or in combination to promote electronic commerce.
The solution is a custom when fully implemented, the virtual retail or Vetail system provides value for all classes of participants. Customers get personal service, i.e., become an intensive interaction and customized information through instant message technology. Customers also get once step shopping, a pleasant shopping experience when merchandise is displayed in an attractive way; ease of use, ability to make a single payment for an entire transaction; single payment for a basket of goods which may come from a variety of different merchants; a single transaction, a 24-hour, 7-day a week virtual retail experience in the possibility of participant in incentive programs that was made easier through the e-commerce aspect of the present invention.
In addition, in a fully networked economy there are opportunities for new incentive and promotional programs that take advantage of increased software, hardware and communication power of the Network Economy.
Customer award programs have been known for years. Early examples include programs such as the S&H Green Stamp programs and the like. Similarly, there are various known employee incentive programs for promoting the sales of products and services. Known incentive programs are often cumulative, that is awards are earned through the accumulation of “points” (which are referred to by different names such as credits, miles, dollars, stamps, coupons, etc.). Rules are established to determine how many points are awarded for each participant action and how many points participants must accumulate to be entitled to certain rewards. A sales incentive program, for example, might award a certain-number of points to participants for selling a designated dollar volume or quantity of products. When the participant accumulates a predetermined number of points during a certain time period, the participant is eligible for an award. The value of the award may also increase with increasing number of accumulated points. In known programs, the accumulated points may be used to purchase merchandise illustrated in a company catalogue, or to earn vacations. In some instances, the points are converted to a direct cash equivalent, which is distributed to the individual at predetermined time periods.
In the past 20 years, incentive programs have become more sophisticated and ubiquitous. Airline frequent flyer programs were among the first examples of computer-implemented customer incentives. Frequent flyer programs proved to be so successful building customer loyalty that it is practically impossible to operate an airline that does not have a frequent flyer program. With the aid of computers, incentive programs have been extended to credit card, debit card, smart card and point of sale incentive programs.
The increased availability of information technology, changes in regulations and recognition of opportunities available in incentive programs, have led many financial institutions to offer incentives to encourage participant activity that is deemed profitable by the financial institution, most commonly credit card use examples are known incentive programs include the American Airlines Co-Branded Visa Card and similar cards that are co-branded with an airline's logo. In such programs, the cardholder earns “frequent flyer points” through use of the card. In 1986, the Sears Financial Network introduced the Discover Card, which offered customers monetary rewards for using the credit card. Recently, similar incentive programs have been proposed for point of purchase transactions, debit card transactions and transactions over the Internet. Some known programs offer participants choices with regard to redemption of “points.”
The American Express member reward program allows card users to accumulate points within a separate account. The points may be redeemed, for example, for a variety of awards and may be transferred into the frequent flyer programs of certain member airlines.
More recently card programs such as the GM card, the Ford card and the Driver's Edge card programs have been introduced. Under these programs, a co-branded card is imprinted with the sponsor's logo. The customer earns a rebate (e.g., 5%) for every qualified purchase of a wide variety of goods. Almost all goods are included, except for cash advances, transferred balances from other card accounts, credits, ATM withdrawals, fees, finance charges, and net purchases made after a maximum annual rebate has been earned. Promotional rebates, however, can be earned above and beyond the rebate cap. A customer may earn up to a predetermined amount, e.g., $1000 in rebates every year (every 12 consecutive months from the date the customer becomes a card member) and a maximum (e.g., $3,000 over a set period such as 3 consecutive years.) The customer can also earn an extra five percent promotional rebate when using the card at other sponsor companies (e.g., participating Hertz or Texaco locations, for example). Each rebate expires at the close of the calendar quarter 5 years after it is earned. The financial institution's system automatically keeps track of the rebates and a rebate summary appears on the customer's monthly billing statement. Customers may use rebates toward the purchase or lease of an eligible car.
Known cash rebate programs are different from pure “accumulation” programs. Sears issued the Discover card, co-branded with “Sears Financial Services” imprint on its face, in 1986. The card included an incentive program under which a user's account was credited with a 1% cash rebate on all purchases. If desired, the rebates were automatically credited to the card account. Other similar prior art incentive programs include the Execu-Charge Card, Citibank's CHOICE card and the J.C. Penny card and “Penny Points” program described in an American Banker article of Sep. 8, 1996. The Penny Points program involved the use of co-branded cards to earn “Penny Points,” which could be redeemed for future discounts on J.C. Penny merchandise. For every five dollars in purchases spent using the card, the customer earned one Penny Point. When the customer accumulated 200 points, a 15% rebate certificate was issued and automatically included in the customer's statement. The certificate could be used for a 15% discount on merchandise at any J.C. Penny store. There are also a number of prior art patents directed to computer implemented incentive programs.
U.S. Pat. No. 5,025,372, for example, discloses a system and method for administration of an incentive award program through the use of credit cards. The specification describes an incentive program that would be used primarily in connection with typical trade incentive programs in which companies sought to stimulate sales or other business by means of incentive programs directed to employees or sellers of the company's products. Other portions of the specification suggest that the invention might be useful in other contexts that are now known, including an incentive award program for selling a certain quantity of a sponsor's product using computer processing, programming and printing for assignment and issuance of credit instruments to participants. In such programs, monetary amounts are awarded to participants for the purchase of a virtually unlimited variety of goods and services through the participants' credit instrument accounts depending on the participants achieving a certain level of performance.
The above-mentioned U.S. Pat. No. 5,025,372 focuses on the issuance of credit instruments to participants in the program. The incentive award program in uses computer processing, programming and printing for the assignment and issuance of such credit instruments including monetary amounts awarded to the participants for use in the participant's credit instrument account. Participants identifying information and credit instrument account numbers are stored in memory. The incentive program can then be divided into multiple time periods. The levels of performance are calculated and assigned for each participant for a monetary amount to be available for expenditure through the participant's credit instrument. The trade name or trademark of the company sponsoring the incentive program may also appear on the physical credit instrument and on statements provided to participants. Messages printed on the reports themselves or on other documents mailed to participants stimulate and encourage the participants to perform under the incentive program.
U.S. Pat. No. 4,750,119 describes a purchasing system with a rebate feature. The system is utilized by subscriber-purchasers, vendors providing goods and services, a future benefit guarantor such as an insurance company selling annuity contracts and in some cases an escrow agent. The purchasing system allows for the input of purchase orders from the subscriber-purchasers for selected goods and services and correlates the transfer of funds from those purchaser-subscribers to the various vendors selling the selected goods. In one instance, the transfer occurs between the subscriber-purchasers and the escrow agent. The future benefit guarantor supplies a rebate factor, which is input into the system. The system then computes and reports a rebate, which is due in the future to each subscriber-purchaser from the future benefit guarantor. The rebate is based upon cost of the individually selected goods and services and the rebate factor. The system provides instructions to pay the vendors for the selected goods and services and to pay the future rebate guarantor a premium representing the purchase price of the future guaranteed rebates. Preferably, the premium is paid on a daily basis to the guarantor and a group annuity contract is funded until the end of the fiscal year. At that time, the system further instructs the guarantor to issue individual future guaranteed rebate contracts to each purchaser-subscriber based upon the total rebates or total purchases over the accounting period.
U.S. Pat. No. 5,287,268 describes a centralized system of accumulating cash value for consumers based upon point-of-sale transactions with multiple merchants is disclosed wherein for each transaction, the consumer's account number (such as the Social Security number) which may be different from the consumer's credit card account number, for example, is transmitted to a central system along with data identifying the merchant and a credit value for the transaction. The credit value may be based upon predetermined incentives associated with the transaction such as coupons, rebates or discounts, and/or upon a credit rate determined by the merchant applied to the amount of the transaction. At the central location, a cash value for that consumer is incremented by the credit value and a bill value for that merchant is similarly incremented. Periodically, the merchants are billed for the accumulated bill value or credited for any third party incentive amounts confirmed at the central location. Also, at selected intervals, consumers are given access to their respective accumulated cash values by either a check in that amount or through a funds dispensing electronic terminal access or the like.
Under this program a consumer, upon making a purchase from a merchant will obtain a credit value equal to a portion of the amount of the purchase. The portion which is to be credited is determined at the time of sale based on a rate which may be selected by that merchant irrespective of the rate selected by other merchants and independent of a central authority. Alternatively, the rate may be based in whole or in part upon a pre-assigned rebate or coupon value such as from a third party, or a combination of pre-assigned and merchant selected factors. The credit value is then transmitted to a central system communicating with all the participating merchants, whereat the credit value is added to a cash value maintained for that consumer's account. At pre-selected intervals, such as on the occasion of the consumer's birth date, that consumer is given access to cash in an amount equal to the accumulated cash value. The credit value may also be added to a bill value maintained in an account for the involved merchant. The merchant may be periodically billed the accumulated bill value amount where consumer credit values are discounts or rebates from the merchant. The credit value is determined based either upon a coupon or rebate value amount input by the merchant at the time of sale and/or upon the amount-of the sale and the credit rate as input by the merchant. The determining credit value is then transmitted to the central system along with the consumer's account number and birth date whereat the credit value is added to the cash value maintained in the consumer account associated with the unique account number and the birth date. The consumer may then access the money through an electronic terminal for dispensing funds such as a bank terminal or the like which communicates with the central system to issue funds when the authorization is present. Alternatively, the central system may issue checks to the consumers.
U.S. Pat. No. 5,734,838 describes a database computer architecture for managing an incentive award program and checking float of funds at time of purchase and an advanced intelligent network based information distribution system including a central office switching system connected to communication lines including at least one service switching point for selectively providing switched communications between the communication lines, a network controller arranged for selectively providing control data to effect land line communications, and arranged separately from the central office switching system, an incentive award computer system provides an award to users participating in an incentive award program. The incentive award computer system includes a request transaction processing computer system receiving an electronic transaction by a user, determining whether the electronic transaction is a reward eligible transaction, and generating a transaction request when the electronic transaction is determined to be the reward eligible transaction. In addition, a points calculator processing computer system is provided that determines a reward responsive to the reward eligible transaction represented in the transaction request, assigns the reward to a user record responsive to reward criteria, and generates a reward record representing the reward. The incentive award computer system further includes a points assigning and reporting processing computer system that generates reports and provides access to the user record and the reward by the user responsive to predetermined criteria.
U.S. Pat. No. 5,689,100 describes a debit card system and method for implementing incentive award program for a customer having participants. A plurality of debit cards, each assigned to one participant and having a unique account number corresponding to an award account of the participant is part of the system. A bank filter processor accesses program data including data identifying the authorized unique account numbers of the participants, data identifying the authorized merchants and data indicating the balance in each participant's award account. The filter processor compares this program data to the following transaction data: the initiating account number of the card initiating the transaction, the merchant identification data of the initiating merchant, and the data regarding the amount of the initiated transaction. The filter processor generates validating data for the transaction when the evaluated transaction data indicates that the transaction has been initiated by an authorized merchant using the unique account number of one of the participants having a sufficient balance in the participant's corresponding award account to cover the transaction. Otherwise, invalidating data is generated.
Computer implemented incentive programs have also been used in casino gaming. For example, U.S. Pat. No. 5,795,225 describes a method and apparatus-for including a progressive jackpot component in a live casino table game. In addition to playing a live casino table game, each player makes an additional wager at the beginning of each hand that makes that player eligible to win all or part of a jackpot. If during the play of the hand a player is dealt a predetermined arrangement of cards, the player wins a preselected percentage of the jackpot amount. The jackpot is progressive in that un-won amounts of the jackpot carry over to the next hand. Apparatus is provided to receive each gaming token wagered for the jackpot component, to increment the jackpot meter which displays the jackpot amount, to decrement the jackpot meter whenever a winning hand is paid and to reset the apparatus for the next hand.
U.S. Pat. No. 5,915,244 describes a computerized incentive program having plateau pricing and a personalized bank-account system, and permitting remote award redemption is disclosed. In one embodiment of the invention, a computerized incentive-program system includes a pricing component, which converts a price of each of a plurality of awards into award levels such that each price within a particular price range is converted to a single award level. The system also includes a bank account component, which tracks an award balance for each of a plurality of participants and permits each participant to redeem at least a portion of the award balance for an award. Finally, the system includes a certificate component, which permits a program participant to remotely redeem a certificate having a value at least a portion of the award balance by identifying a serial number unique to the certificate, upon conclusion of the incentive program.
The present invention also relates to online incentive programs. Recently Web loyalty programs have been introduced in recognition of the facts that a) online consumers want to be rewarded for their loyalty, and b) profit can be derived from loyal web site users through advertising and joint marketing promotion. One such program, known as ClickRewards, rewards consumers with frequent flyer miles on all of the major U.S. airlines. Participants earn ClickMiles for completing activities on sponsor's web sites such as making a purchase to registering software. Participant's can then exchange their ClickMiles for frequent flyer miles on their favorite airlines, as well as other valuable rewards. In addition, ClickMiles can be combined with offline frequent flyer miles, making them even more valuable.
The underlying system is described in U.S. Pat. No. 5,774,870. This patent describes a fully integrated on-line frequency award program. A user may access the program on-line and may browse a product catalog for shopping. The user may electronically place an order, upon which the program automatically checks the user's credit and electronically issues a purchase order to the supplying company. The program also calculates award points, updates the award account of enrolled users, and communicates that number of awarded points to the user. Enrolled users may browse through an award catalog and electronically redeem an amount of awarded points towards an award. The program then electronically places an award redeeming order with the fulfillment house and updates the user's award account.
Other programs are described in industry publications, including, for example
Moore, “Technology Explosion Shapes Marketing's Future”, Bank Marketing, v24n5 pp:24-27, May 1992, Dialog file 15, Acc. No. 00615749.
Arndorfer, “More groups enhance credit cards to get up to speed in a tight race (credit unions offer promotions), American Banker, v160, n174, p. 22(1), Sep. 11, 1995, Dialog file 148, Acc. No. 08123473.
“Supermarket Update: Bank One Ready to Unite Electronic Payments with Vision value Shopper Cards”, POS News, Sep. 1, 1993, Dialog file 16, Acc. No. 04590660.
“A little Battle Royal in the UK”, Credit Card Management, Nov. 1994, p. 90, Dialog file 16, Acc. No. 05388649.
“Frequent-Shopper Plans Get a Chipper Look”, POS News, Jan. 3, 1995, Dialog file 636, Acc. No. 02630357.
Fickenscher, “Star bank in Cincinnati offering air miles perk . . . ”, American Banker, v159, n176, p. 23(1), Dialog file 148, Acc. No. 07816374.
Kleege, Stephen discloses an article entitled “In star Bank's flexible flier program, any airline will do”, American Banker, v159, n1, p.12(1), Jan. 3, 1994. Dialog file 148, Acc. No. 07161362.
“Bank of Hawaii offers travel bonus”, Honolulu Adviser (Honolulu, Hi., US) p. C1, Mar. 14, 1996. Dialog file 635, Acc. No. 0690801.
“Business Travel: Airline perks in peril . . . ”, Financial Times (London) Jul. 11, 1994, p. 14, Dialog file 16, Acc. No. 05160615.
“Another chance for Chip cards”, Smart cards may be ready to make headway in card-based payment systems, Credit Card Management, September, 1993, p. 30, Dialog file 16, Acc. No. 04679883.
“Point Blank Video Library: Uses ‘Video Incentive Program’ to boost video rentals”, Video Store, Mar. 20, 1992, p. 46, Dialog file 16, Acc. No. 03701747.
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Notwithstanding the many existing programs that are currently known, there are problems with existing incentive programs. Known systems do not take full advantage of the personal communication and electronic commerce systems available for use by participating users and participating merchants in the Network Economy and are not capable of incentivizing individual participants in a precise way. Moreover, cumulative awards do not sharply discriminate between true brand loyalty and high demand. Instead, a group or herd approach is taken and incentives are equal for a large class of participants. Thus, a high volume user can benefit from participating in a number of competitive programs (e.g., programs offered by different airlines) without showing loyalty to any one sponsor. It is this type of high volume user that program sponsors find most desirable, however. The present invention provides a competitive advantage by allowing targeted incentives that can be used, for example, to capture the full loyalty of high profit customers.
Another challenge in the environment of electronic commerce is delivery of goods directly to a customer's home. On a national scale, delivery is typically accomplished through the United States Postal Service, or through one of the private couriers that operate out of certain hubs—FedEx, for example, ships all packages through a hub in Memphis, Tenn. However, such delivery modes are not practical for local delivery of certain goods, such as groceries, prescription drugs or meals from restaurants. Thus, there remains a need for a practical, efficient means of local delivery.